PRODUCT SOFTWARE DEVELOPMENT EXPENDITURES

The Company follows the guidance of ASC 985-20 “Costs of Software to be Sold, Leased, or Marketed” when capitalizing software development costs associated with software embedded in or to be incorporated into its products. The cost of purchased software technology is capitalized and stated at the lower of unamortized cost or expected net realizable value. Software is subject to rapid technological obsolescence and future revenue estimates supporting the capitalized software cost can be negatively affected based upon competitive products, services and pricing. Such adverse developments could reduce the estimated net realizable value of our product software development costs and could result in impairment or a shorter estimated life. Such events would require us to take a charge in the period in which the event occurs or to increase the amortization expense in future periods and would have a negative effect on our results of operations. At a minimum, we review for impairment on a quarterly basis. The Company launched a new product offering in 2012 and began amortization of the related capitalized software. Amortization is being recorded over a three year period or a fixed amount per unit sold, whichever is greater. Changes in the product software development costs net of accumulated amortization were as follows:



Fiscal Year Ended June 30,	Balance, beginning of year		Capitalized software costs	Amortization charged to expense		Balance, end of year
2013	$	4,231,609	—	(1,558,318	)	$	2,673,291
2012	$	3,229,370	1,145,106	(142,867	)	$	4,231,609

Future amortization of capitalized software costs is expected to be approximately $1,458,159 in fiscal year 2014 and $1,215,132 in fiscal year 2015.